Problem $15-51($LO $15-3)($Algo$)$

$[$The following information applies to the questions displayed below.$]$

Sandra would like to organize LAB $($a legal corporation$)$ as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an $8$ percent annual before$-$tax return on a $$775,000$ investment. Sandra's marginal income tax rate is $37$ percent and her tax rate on qualified dividends and net capital gains is $20$ percent. LAB's income is not qualified business income $($QBI$),$ so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity$-$level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers.

Note: Round your intermediate computations to the nearest whole dollar amount.

Problem $15-51$ Part $($Algo$)$

b$.$ What is the overall tax rate on LAB's income in the first year if LAB is organized as an $S$ corporation or as a Corporation?

Note: Round your final answers to $2$ decimal places.

$\backslash$table$[[,$Overall Tax Rate$],[$S corporation,$\%$